Gold (XAU/USD) and Silver (XAG/USD) both extended their declines on Wednesday, with Gold trading around $4,430, its lowest level since March 30, and Silver dropping nearly 3.5% to approximately $74.10 during the European session [1][2]. The precious metals struggled to attract buying interest despite a weaker US Dollar and Oil prices, as market participants remained cautiously optimistic about potential progress in US-Iran negotiations. Iran’s State TV reported that Tehran and Washington had prepared an initial unofficial framework for a memorandum of understanding, which could see US military withdrawal and the lifting of the naval blockade in exchange for Iran restoring commercial transit through the Strait of Hormuz to pre-war levels within one month. Any final agreement would be formalized through a United Nations Security Council resolution if reached within 60 days [1].
The headlines contributed to a retreat in the US Dollar Index (DXY) toward the 99.00 mark, reversing previous gains. However, both Gold and Silver failed to benefit, as traders focused on the risk of oil-driven inflation and the likelihood that the Federal Reserve (Fed) would maintain restrictive monetary policy for longer [1][2]. Minneapolis Fed President Neel Kashkari stated that the central bank's major concern is higher US inflation, driven by elevated energy prices, rather than weak labor market conditions. Kashkari noted, 'Most of the US data released since my dissent in April has shown inflationary risks are higher, not lower,' and suggested the Fed should adopt a neutral policy outlook going forward [2].
US headline inflation for April, as measured by the Consumer Price Index (CPI), reached 3.8%, the highest level in nearly three years [2]. According to the CME FedWatch tool, the probability of the Fed holding interest rates steady this year stands at 52.3%, with the remainder favoring at least one rate hike—a significant shift from earlier expectations of two rate cuts before the Middle East conflict escalated [2]. The prospect of persistently high interest rates is weighing on non-yielding assets like Gold and Silver [1][2].
Technical analysis shows Gold trading near the lower Bollinger Band at $4,422, with the Relative Strength Index (RSI) near 37, indicating weak but not extreme downside momentum [1]. Market participants are now awaiting US Personal Consumption Expenditures (PCE) data and speeches from several Fed officials for further guidance on the monetary policy outlook [1].
CONCLUSION
Both Gold and Silver prices are under pressure as markets anticipate the Federal Reserve will maintain a hawkish stance due to persistent inflation risks, despite optimism around US-Iran negotiations. The likelihood of higher-for-longer interest rates continues to weigh on non-yielding assets, with traders closely watching upcoming US economic data and Fed commentary for further direction.